In 2020, more than $17 billion was invested in food technology solutions.-FoodTech Data Navigator
Presently, Instacart uses thousands of gig workers to shop and deliver groceries, with consumers paying upwards of 25% in delivery fees, tips and price hikes per order. The popularity of these services grew during the pandemic, and are expected to keep growing now that they have, in a sense, been mainstreamed.
In its Beyond the Cart: A Year of Essential Insights, Instacart explores how the pandemic changed its business model and the way people shop for food. One of the most revealing finds is that seniors accounted for the largest jump in Instacart users compared to any other age group. To date, nearly 300,000 seniors have learned to use the app with the help of Senior Support Service. And according to a Harris Poll of those who bought groceries online during COVID-19, 77% say they are likely to continue to do so in the future.
Instacart predicts that the future of food access will be defined by a few factors, including:
• Speed and Convenience
When presented with delivery options including two-hours or less delivery, five-hour delivery and other scheduled options throughout the day, 85% of customers opted for delivery within two-hours or less. In 2020, 95% of small orders were delivered in under two hours and 50% were delivered in less than one hour.
• Adds Accessibility
Post-pandemic, the profile of the online grocery delivery customer will continue expanding to both younger and older customers. The use of the technology by seniors has been growing by about 1000 senior customers daily.
• A Personal Touch
Now that customers have spent a year communicating directly with their shoppers, there will likely be a boost in chat functions. Elevated use of phrases and emojis that communicate gratitude suggest customers will retain a deeper sense of appreciation for their personal shoppers.
With demand for food e-commerce growing, thanks to everything from front-door deliveries to meal kits, food tech companies raised about $17.3 billion in 2020. Of this, 68% went directly to the e-commerce and delivery businesses. And meal kits alone raised $6.2 billion, while e-commerce companies raised $5.3 billion.
It’s expected that delivery platforms will dominate the food tech space even more in the coming year, thanks to smarter options for consumers. For example, so-called ghost kitchens are already helping to create delivery-only brands that are gaining in popularity even if they never had a brick-and-mortar presence in the first place. In addition, third-party fulfillment centers that cook and batch for a variety of brands, are expected to increase their market presence, according to Fast Company. These are literally places where food is made to ship out rather than eat in. All of this will be happening while changes continue to shape the playing field, like Uber acquiring Postmates, DoorDash going public and Grubhub being sold.
In fact, a new swath of delivery platforms will also likely be shaped, in part, by evolving consumer behaviors and demands post-pandemic with an increase on customization. GoPuff in the U.S., for example, will deliver convenience items and alcohol in cities in less than 30 minutes, while Instacart and other grocery-only platforms will likely expand to include many more deliverable goods outside of food.
What Consumers Want
Today’s consumers have an abundance of food options at the tap of a smartphone button. But more than ever, tech-savvy users are truly seeking nutritious food that can be accessed easily, with limited waste from companies that align with their personal tastes and ethics. Spending trends suggest that consumers are willing to pay much more for convenience and better quality overall, especially if the food they order is healthy and has a far less negative environmental impact.
A big part on this farm-to-table e-commerce niche are companies that ship ready-to-use meal kits like Hello Fresh, Daily Harvest and Blue Apron, all of which grew in popularity during the pandemic. Designed to eliminate the need to shop for ingredients or to even know how to cook, the kits have become a fast-growing category since the first one was introduced in 2012. According to Statista, at the current trajectory, meal kit revenue is expected to grow to more than $7.6 billion by 2024, an increase from $2.5 billion in 2017.
What makes the kits so appealing is the sheer variety of cuisines being offered, the freshness of ingredients and the ease of use, like being able to put together ingredients to make a restaurant-quality meal at home, even for consumers who may not know their way around a kitchen. There is also the connection people have cooking together, something that exploded in popularity during the pandemic.
By 2022, the meal kit industry is expected to be worth $11 billion in the U.S. alone, skewing younger in terms of consumers. A Money-Blue Consult survey revealed that more than a quarter of Generation X and almost 30% of millennials had used the meal kit service. But when it comes to Baby Boomers and older generations, only about 12% tried the kits.
The biggest demographic for the kits tends to be mostly urban, primarily male consumers that earn six figures. American consumers who use the kits (81%, according to a Harris Poll) say they thought they were ultimately healthier compared to take-out options. The same consumers also seem to prefer meals at home to eating out, with health-consciousness shaping what they order.
Overall, the idea of “big food” is becoming less appealing than “small food,” according to EY, a think tank connected to Ernst & Young Global Limited. Food by design, the idea that nutrition can be customized sustainably and delivered easily, will potentially reform the way people eat, what they eat and how technology impacts the global supply chain and, perhaps even more significantly, human health.
With more personalized, localized eating becoming a major driver of the food tech world, companies will have to consider what role they ultimately play. Consumers will continue to influence how the industry pivots to account for cultural and scientific changes, global and climate challenges and ultimately how we all think about what we eat and how.